Elgi Equipments Limited (NSE:ELGIEQUIP) Q2 FY23 Earnings Concall dated Nov. 07, 2022
Corporate Participants:
Jairam Varadaraj — Managing Director
Analysts:
Kamlesh Kotak — Asian Markets Securities Limited — Analyst
Ravi Swaminathan — Spark Capital — Analyst
Renjith Sivaram — Mahindra Mutual Fund — Analyst
Harshit Patel — Equirus Securities — Analyst
Vinod Shastri — Instanomic Ventures — Analyst
Govindraj — Individual Investor — Analyst
Naveen — NS Capital — Analyst
Bhavin Vithlani — SBI Mutual Fund — Analyst
Manish Goyal — Individual Investor — Analyst
Rahul Gajare — Haitong Securities — Analyst
Vipul Shah — Sumangal Investments — Analyst
Presentation:
Operator
Ladies and gentlemen, good day and welcome to the ELGi Equipments Q2 FY ’23 Earnings [Technical Issues] Call hosted by Asian Markets Securities Limited. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions, and expectations of the company as on date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict. Actual results may differ from such expectations, projections, et cetera, whether expressed or implied. Participants are requested to exercise caution while referring to such statements and remarks. [Operator Instructions]
I would now like to hand the conference over to Mr. Kamlesh Kotak from Asian Markets Securities Limited. Thank you, and over to you, sir.
Kamlesh Kotak — Asian Markets Securities Limited — Analyst
Thanks, Inba [Phonetic]. Good evening, everyone. On behalf of Asian Markets, we welcome you all to the 2Q FY ’23 earnings conference call of ELGi Equipments Limited. We have with us today Mr. Jairam Varadaraj, Managing Director representing the company.
I request Mr. Jairam to take us through an overview of the quarterly results and then we shall begin the Q&A session. Over to you, sir. Thank you.
Jairam Varadaraj — Managing Director
Good evening, ladies and gentlemen. Thank you very much, Kamlesh, for hosting this call. Like we normally do, I will take you through, first, the current quarter’s performance with respect to — in comparison to last year’s same quarter. I’ll give you a reconciliation of the EBITDA based on what it should have been and what it is. So if you look at the growth in sales and the improvement in the contribution margin at a material cost level, our EBITDA should have been around INR160 crores. Instead, it’s about INR110 crores. So there is a close to a INR50 crore difference between of what it should have been and what it is.
The biggest two things are the fixed costs that have gone up. We have to keep in mind that the fixed cost during the same period last year was extremely subdued and it was artificially subdued because of the COVID situation. So what we’re seeing is basically the fixed costs coming back to normal levels. So nothing to be alarmed about, considering the fact that we are sustaining our improved margins at the contribution level. So I would not — I would — when I look at both employee cost and other fixed costs, there is no specific country or no specific event or incident that is causing. It is just a general increase across all. And we should expect that it should be at these levels going forward, because these are really the normal levels that have come back here.
Now going to the sales, I’ll start like I normally do, with Australia. Australia was better than last year, but that’s not saying much, because, if you remember, Australia was particularly affected. In fact, Australia and Southeast Asia, were particularly more affected by COVID than the rest of the world. So we’re coming back, but we are [Technical Issues] that it could be far better than what it actually is. It’s the same situation with Southeast Asia. In fact, Southeast Asia is better than last year, but still not as good as Australia’s recovery has been. Coming to India, again if you look at India, we had a very strong last year first two quarters on the back of orders for oxygen requirement — compressors for oxygen requirement, which is not there in this quarter. So we have grown compared to last year without the oxygen thing, so it’s been good.
Moving forward towards Europe, Europe has had a good growth, continues to grow well, in spite of the problems that we are having with the Ukraine war and the energy prices. We are continuing to grow. We’re growing as per our plan. The overall strategic plan that we have made for Europe, it’s still to us to pulled in perspective, we are a very, very, very small player in a significantly large market. So we’re continuing to grow that. North America, particularly US, was very strong for us. We were able to — the entire team, the back-end team, operations team did a fantastic job of making sure products are available. They were able to manage the supply chain challenges far better I believe than the competition has, because our lead times now all over the world have become very competitive and almost — not almost, it’s even better than pre-COVID levels. So this is a good thing. And these kinds of things have helped us. Of course it hit us on our cash flow in terms of inventory that we had to go through, but we’re beginning to get that under control.
So Brazil had a good performance as well and Middle East also grew well. So across the world, we’ve had good performance in all the geographies that we’re participating in. Our automotive equipment business also grew compared to last year, but last year, if you remember, the first quarter was almost a wash for the automotive equipment business. It didn’t have, like the compressor business which had the oxygen compressors, automotive didn’t have a supplemental business and it was a really bad first quarter. So the second quarter was a recovery for it. So to that extent, growing over a recovery in quarter I think is a good thing. So they are also doing well. So, overall, across the board, we have done well, both on top line as well as the bottom line.
Now, looking forward into the quarter, during the last call, I had mentioned that we will have a good Q2, but we’re not sure of Q3. Things seem to be okay for Q3 as well. At least, I’m confident of the first two months, but I’m not sure beyond November what could happen. We’ve got to keep in mind what happened with commodity prices in a very short period in the month of December in 2020. So the world has demonstrated that things can change quite rapidly, quite drastically. So we’re keeping our fingers crossed. So we still think that Q3 will be good, but we have to wait and see. So there’s a bit of a caution on that.
As far as our price realizations, like I had explained to you in the previous quarter call, we had done some price — the problem that we had in 2021-2022 was the runaway costs. I mean, their costs were increasing on a weekly basis and pretty significantly and no amount of price correction we were able to catch up with that. So in February of this year, we decided, even while the prices were still at very high levels, we decided we’re going to forecast or anticipated costs and then we’ll set prices based on anticipated cost, which is what we did. We struggled through those price increases in the first quarter. We started getting some traction and you can see the result of that in the second quarter. We expect that to continue, but in some areas, we may have to do some corrections that this is something that we are analyzing so that we remain competitive. We are not going to give away prices, which are based on cost increases, but if there are cost increases that we had overestimated and to that extent, we have to need to correct prices we will do so. So the idea is growth and back to profitability. So we will continue to manage that, watch that and do that well in the third quarter.
So coming back to, like I mentioned, our ability to make products available was one of the competitive advantages that we had in the first two quarters. And as a consequence of not being sure of shipping lead times, supply lead times, we had to take the worst case and plan our inventory basis that. So the consequence of that was that we had a huge increase in inventory to the extent of almost I think INR150 crores, if I’m not mistaken. So this was — so that increase is being progressively handled now in all the regions as well as in the manufacturing unit. We are scaling down our inventory to reflect the latest lead times and the latest shipment times. So we think it could be a two-month to three-month transition period before we start seeing the results of it at the inventory level, but cash flow of course should start improving even before that.
So as a consequence of all that, as of Q2 end, our net closing debt was close to INR155 crores when closing debt in March was around INR90 crores. So to that extent our debt has increased by INR65 crores, primarily — not primarily, only because of the inventory, because our receivables are remaining flat in spite of growth in sales. So we’re confident that this will come down. I’m not able to predict exactly what the number would be at the end of the third quarter or at the end of the financial year, but it will be significantly lower than what it is now.
Coming to our capex, we had grand plans as always. We start with investing in machinery, but our total spend so far has been about INR25 crores, and we believe we will spend another probably INR25 crores, INR30 crores in the remaining year. So nothing significant there. We are working on a major capex plan to shift our city operations to our main campus outside the city. The detailing is being done. So once the numbers and the timings are ready, I will be able to share them with you. So this is really a summary of our quarter, our performance, our cash flow.
Thank you very much. I will be happy to take your questions now. Thank you.
Questions and Answers:
Operator
Thank you very much, sir. Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions] Our first question comes from the line of Ravi Swaminathan from Spark Capital. Please go ahead.
Ravi Swaminathan — Spark Capital — Analyst
Hi, sir. Congrats on a good set of numbers. My first question is with respect to the growth in the domestic market. So basically we had — we are looking at some 7% growth during this quarter. Adjusted for the last year sale of oxygen concentrators, so basically what would have been the kind of growth — what would have been kind of volume growth and how do you see the domestic market panning out?
Jairam Varadaraj — Managing Director
So the overall growth in our — without the impact of O2 has been at a consolidated level close to 18%, whereas with O2 what we have reported is about 12%, right. So the difference really has been the contribution from India without O2, right. So that’s really the summary of it, Ravi.
Ravi Swaminathan — Spark Capital — Analyst
Okay. Now what would have been the volume growth, sir, of — in this, and your outlook on the growth for India going forward?
Jairam Varadaraj — Managing Director
So the volume growth is about 8%. So as far as India outlook is concerned, very difficult to say. I mean, there are two — there is a positive and the negative. The positive is that India is happening, it is being spoken about in all over the world. There is a China Plus One strategy. There is also the various schemes that the government is looking at to — into localized businesses. So these are all positives that are there, but the negative, of course, is the overall world economic order. There are constant conversation of inflation, impending unemployment, recession, interest rates, the war. There’s nothing positive outside of India. So we need to look at what is the net-net impact of this. So can’t make any conclusive statements on that.
Ravi Swaminathan — Spark Capital — Analyst
Got it, sir. And you have seen very good expansion in the gross margin, especially at a standalone level. This is in spite of the fact that I think input costs would have gone up during the second quarter, I mean, or rather the inventory, which would been there would have been higher input cost. What is the recent behind this gross margin expansion?
Jairam Varadaraj — Managing Director
So, like I explained, we did a price correction in February, March based on anticipated per cost increases because we were not able to catch up with cost increases in the prior year. So that was the model that we took and we implemented it. We had various — there was a long gestation in different markets in terms of realizing it. There was old inventory that was there as well. So all that came into fruition in this quarter. So that’s the result.
Ravi Swaminathan — Spark Capital — Analyst
Got it, sir. Thanks a lot, sir.
Jairam Varadaraj — Managing Director
You’re welcome.
Operator
Thank you. Our next question is from the line of Renjith Sivaram from Mahindra Mutual Fund. Please go ahead.
Renjith Sivaram — Mahindra Mutual Fund — Analyst
Yeah. Hi, sir.
Jairam Varadaraj — Managing Director
Hi, Renjith.
Renjith Sivaram — Mahindra Mutual Fund — Analyst
Yeah. Good set of numbers to start with. Sir, was there any positive impact of the currency because we have a lot of exports and rupee was depreciating. So what was that impact — positive impact because of that?
Jairam Varadaraj — Managing Director
So for us currency was only a 1% impact, because you all understand we have dollar on one side, we have also euro on the other side, right. And we have significant presence in both these countries. So while the dollar was a favorable improvement, euro was an unfavorable improvement, right, unfavorable development. So net-net, we got only 1%.
Renjith Sivaram — Mahindra Mutual Fund — Analyst
Okay. And sir, like this price increases which we have taken now that the raw materials have come down, our competition will also start to reduce prices. So what kind of price correction in our end products which we have to take in the next two months to three months?
Jairam Varadaraj — Managing Director
So we are still analyzing that Renjith. We need to figure out what is the current cost, what is the — we don’t want to get into a situation where again volatile changes happen to raw materials and we again get left behind. We want to learn from the past, make sure that we have a detailed analytical view of the future and basis that review, review our prices and see if there is a need for us to make changes.
Renjith Sivaram — Mahindra Mutual Fund — Analyst
Okay. And, sir, just one thing just an understanding point of view. I have also visited a lot of this pick and carry machine kind of a facility where there is a lot of impetus from the government. We are seeing a lot of capex happening, but I haven’t seen any ELGi compressor used in any of this chip manufacturing or SMT manufacturing facility. It’s largely some other imported or some other foreign brand. So are we — do we have an offering or are we looking at that, because that’s going to be a huge market.
Jairam Varadaraj — Managing Director
Absolutely. I don’t know which factory you visited in India because the PLI scheme for semiconductors, we know that very few factories have been converted into actual factories. The projects are on and in many of the projects we have got the orders.
Renjith Sivaram — Mahindra Mutual Fund — Analyst
Okay. So we have an offering there?
Jairam Varadaraj — Managing Director
Of course. And outside of India some of the leading brands, I can’t mention names because of confidentialities, some of the leading brands in semiconductors are our customers.
Renjith Sivaram — Mahindra Mutual Fund — Analyst
Okay. The PRF [Phonetic] investors which you have said, ASM is one of the largest machine manufacturing here. So because of this German thing, does we have a tie-up with the German compressor and are we losing out on that or nothing like that exist?
Jairam Varadaraj — Managing Director
Sorry, I didn’t understand your question.
Renjith Sivaram — Mahindra Mutual Fund — Analyst
ASM is one of the largest machine manufacturing for chips.
Jairam Varadaraj — Managing Director
Yeah.
Renjith Sivaram — Mahindra Mutual Fund — Analyst
So because he is of German vintage, does he support mostly German compressors, or is it like nothing kind of an industry?
Jairam Varadaraj — Managing Director
I don’t think so. Bosch is a customer of ours.
Renjith Sivaram — Mahindra Mutual Fund — Analyst
Okay. So we don’t see any major impact because of that.
Jairam Varadaraj — Managing Director
No.
Renjith Sivaram — Mahindra Mutual Fund — Analyst
Okay, that’s great. And sir, this textile, we are seeing kind of a slowdown or — so is that — otherwise you can at least give some perspective like what all are the growth markets for the first half and the second half, which all are the growth, because we are seeing some slowdown in textile which used to be a big market for us?
Jairam Varadaraj — Managing Director
Textiles was never a big market for us, it was not disproportionately higher. As I’ve maintained, one of the benefits of this business is that it doesn’t depend on any one industry vertical. It rides on all industries, but in a given year, there may be one or two industries by virtue of their own endemic problems, they may be struggling, like textiles right now. It was steel a few years ago because of the COVID and there was — demand was not there, but again steel came back with a vengeance. So those cyclicity — cyclical patterns exist in industry [Technical Issues] we are not dependent on any one industry in any significant way. So textiles, yes, it’s almost a year that they have been having [Technical Issues] of cotton prices, but now cotton prices have dropped, mills are again back into the market buying cotton, so it should start up.
Renjith Sivaram — Mahindra Mutual Fund — Analyst
Okay. And in terms of the end user industry, which are one or two, three industries, which you can pickup, which is actually giving a positive outlook?
Jairam Varadaraj — Managing Director
I think all of them are talking about — if I look at our inquiry levels, it cuts across all industries. Question is, are they all going to convert into finalizing orders and when, that’s the question. Yeah.
Renjith Sivaram — Mahindra Mutual Fund — Analyst
Okay, sir. Thanks and all the best.
Jairam Varadaraj — Managing Director
Thank you.
Operator
Thank you. Our next question is from the line of Harshit Patel from Equirus Securities. Please go ahead.
Harshit Patel — Equirus Securities — Analyst
Thank you very much for the opportunity, sir. Sir you have mentioned that we are progressing as per our plan in the European expansion. So I think the plan was to breakeven in FY ’24 and to start making money from FY ’25 onwards. Sir, could you explain to us as to what were the losses that we have incurred so far in the first half of FY ’23 and what should be the full-year losses for us?
Jairam Varadaraj — Managing Director
So, Harshit, one of the things is, yes, the plan was FY ’24, before COVID, but in COVID we lost a year. So the breakeven actually happens in FY ’25, right. So that is point number one. Point number two is, I don’t want to go into the specifics of losses in a given year. Our earlier plan was to invest EUR20 million as — through losses. So that’s about INR160 crores. So we are well below that. So that’s all I can — I would like to say. I don’t want to go into the specifics of what it was in a given year. I would like to say that and then say whatever we are doing today is better than plan.
Harshit Patel — Equirus Securities — Analyst
Sure, understood. And all the major hiring on the employees front on the sales, marketing, administration front in Europe, is that done away with or we are still hiring over there. So I’m just trying to gauge how much increase would be there in our employee expenses going ahead.
Jairam Varadaraj — Managing Director
So bulk of it has been done. Any additional increase will be purely revenue generating increase. So if there is an increase, unless there is an associated revenue that is justified by the cost of that person, it will not be done. So right now we have covered all our basic overheads required for the plan already in place.
Harshit Patel — Equirus Securities — Analyst
Understood. My second question is on the motors front. So where are we? Last time you had mentioned that by the end of 2022, we will get at critical machine, which is needed for the production. And by the end of FY ’23, so the March quarter, we will stabilize the production of motors. So where are we in that plan as of now?
Jairam Varadaraj — Managing Director
Yeah. So if you remember, I had also mentioned in the same call that we had a problem with the vendor and we were talking to them because they were delaying things and they were not meeting our specification. Now what we have done in the meantime is revoked or invoke the bank guarantee that they had given for the advance money that we had paid and we have canceled the order and we have gone with another vendor. And we hope that the delivery of that machine will happen by the fourth quarter of this financial year. And therefore, next year we will have full capacity for the plant.
Harshit Patel — Equirus Securities — Analyst
Understood. And sir, just last small clarification, that 18% like-to-like growth that you mentioned, excluding the oxygen compressor, so was that for our consolidated sales or just the India revenues?
Jairam Varadaraj — Managing Director
Consolidated.
Harshit Patel — Equirus Securities — Analyst
Understood. Thank you very much, sir, for taking my question.
Jairam Varadaraj — Managing Director
Thank you.
Operator
Thank you. We’ll take our next question from the line of Vinod Shastri from Instanomic Ventures. Please go ahead.
Vinod Shastri — Instanomic Ventures — Analyst
Good evening, sir. Thanks for the opportunity and congratulations on the good number. Sir, my question would be, on a standalone basis, we made INR448 crores and the PBT was around INR95 crores and on a consolidated basis, we have made INR738 crores and the PBT was INR104 crores. Just wanted to know which business is underperforming and when do we expect a turnaround in that business?
Jairam Varadaraj — Managing Director
So, Vinod, I don’t want to get into the specifics of each business. That would be too competitive and information for me to share.
Vinod Shastri — Instanomic Ventures — Analyst
Okay, then.
Jairam Varadaraj — Managing Director
But you know that Europe is the one that is losing money and that’s a deliberate plan, right. And that’s the reason why the consolidated number does not move proportionate to the standalone number.
Vinod Shastri — Instanomic Ventures — Analyst
Okay, sir. The follow-up question would be, the operating profit margin for the quarter was somewhere around 15.2 percentage. Is there any scope of improvement or we are somewhere around the peak?
Jairam Varadaraj — Managing Director
At the current level of pricing, we are probably at the peak, but the growth — the idea of increasing the bottom line or the operating profit margin is through volume, not necessarily through margin.
Vinod Shastri — Instanomic Ventures — Analyst
Okay. Then there was some capex that was done on the Sauer thing, ELGi Sauer thing. Is that started — the commencement has started, can we see any material impact towards that?
Jairam Varadaraj — Managing Director
No, we don’t have any — ELGi Sauer we have not made any investments into ELGi Sauer.
Vinod Shastri — Instanomic Ventures — Analyst
There was some kind of capex for somewhere around INR50 crores was there?
Jairam Varadaraj — Managing Director
But that is by the subsidiary company, it was not by the parent company. They are doing it on the strength of their own balance sheet.
Vinod Shastri — Instanomic Ventures — Analyst
Okay, sir. Then we just had a news on this VRS scheme, how much wage cost reduction is expected if that goes through successfully, sir?
Jairam Varadaraj — Managing Director
This is a small number. I don’t think there’s anything significant. By law, we are supposed to get a resolution passed by the Board whenever we do a VRS. We do this on an ongoing basis. If you see in the past few years, we keep doing it. This is primarily to assist employees who have challenges that take — that prevent them from working, but at the same time, they are not so unwell that they cannot work. So we are trying to work that through. So there is nothing significant that can be expected.
Vinod Shastri — Instanomic Ventures — Analyst
Okay. Then the last question would be, there is a big capex that is going on into the railways thing, but do we see any big order flows that is coming into company, sir?
Jairam Varadaraj — Managing Director
Railways are going to make an investment, but unlike the past which were the locomotives were manufactured by government-owned companies like Chittaranjan Locomotive or diesel locomotive works, increasingly, they are looking at private locomotives. I mean, manufacturers to manufacture the high capacity, high horsepower locomotives. We will be participating in these opportunities, but it’s going to be a new landscape completely different from the past. So it’s difficult to say whether there will be a linear kind of a growth for these kinds of opportunities, but we there.
Vinod Shastri — Instanomic Ventures — Analyst
Thank you, sir. Thank you for the opportunity, sir.
Jairam Varadaraj — Managing Director
Thank you.
Operator
Thank you. Our next question is from the line of Govindraj [Phonetic], an Individual Investor. Please go ahead.
Govindraj — Individual Investor — Analyst
Sir, congratulations on a set of good numbers. And my question is, you are shifting the city-based manufacturing unit to outskirts of the city. Whether we will face any labor shortages because most of the laborers will be in and around Coimbatore?
Jairam Varadaraj — Managing Director
No, no. We have already running our factory there and we are having people there and we transport our people there. So that’s not a problem.
Govindraj — Individual Investor — Analyst
Is this a strategic issue or because of the plant being inside the city and what are the future plans if the factory is getting shifted from the city center to the outskirts, sir?
Jairam Varadaraj — Managing Director
Sorry, I didn’t understand your question.
Govindraj — Individual Investor — Analyst
Sir, we are shifting this factory to outskirts, whether any future plans for this city facility?
Jairam Varadaraj — Managing Director
No, we will utilize that for our automotive equipment business as well as other supply businesses that we have, like pressure vessels and motors and all those.
Govindraj — Individual Investor — Analyst
Okay. So some part of the units are getting shifted to outskirts, let’s say, sir.
Jairam Varadaraj — Managing Director
The main production units will go there. These ancillary and supply units will probably remain here.
Govindraj — Individual Investor — Analyst
Okay, sir. Okay, thank you. That’s it from side.
Operator
Thank you. Our next question is from the line of Naveen from NS Capital [Phonetic]. Please go ahead.
Naveen — NS Capital — Analyst
Good evening, Dr. Varadarajan [Phonetic].
Jairam Varadaraj — Managing Director
Good evening, Naveen.
Naveen — NS Capital — Analyst
From your customer profile, sir, are you seeing any positive impact of the China Plus One, Europe Plus One, and the Indian manufacturing resurgence themes? Are you — are we adding clients from niche areas and sectors which we have not seen in the past? Some commentary on those lines will be helpful, sir. Thank you.
Jairam Varadaraj — Managing Director
So, we don’t — we are not a component supplier or a — nor do we white label for other manufacturers. So therefore for us this China Plus One strategy doesn’t affect our business, because we are not competing with the Chinese companies for private labeling for others, right. So the China Plus One strategy really helps those companies who are sourcing points for the big consumers in Europe and the US. So we are not there.
In terms of customers wanting to buy non-Chinese products, either in India or in Europe or in America, we don’t see anything. At the end of the day, business doesn’t get it — doesn’t behave in a biased manner. Business is — behaves in a rational manner. And if there is a Chinese company that is making good quality products and is able to give a good price, nobody is going to say I don’t want to buy Chinese and therefore I will not buy. I mean, you see a lot of Indian companies who buy a lot of Chinese products.
In our own business, I mean, there are so many small Indian compressor companies that got incubated because of the huge demand for compressors for producing oxygen. None of the organized players could suddenly supply that quantity. There was a huge influx of Chinese compressors that were represented or branded in the names of Indian companies, small Indian companies. They made a huge amount of business during that time. And now that the oxygen business has gone, they have to sustain their business through other means. So they are continuing to import from China and they are supplying to the industry. So industry is buying. So I don’t think that China Plus One strategy is a good rhetoric and emotion at a certain political level, but at the economic level, it is rational behavior.
Naveen — NS Capital — Analyst
Thank you, sir. And on the operating front, for this quarter, it has come north of 15%. How do you see this going forward, sir? What would have to happen to take this few notches up? Is it possible with the current product line or do we have to make investments and collaborations in R&D, et cetera?
Jairam Varadaraj — Managing Director
I think our cost to price ratio is pretty much at a level of synchronized levels. Maybe there is some opportunity to review it, which is what I referred to in the earlier part of my conversation. In order for us to move margins, operating margins, or EBITDA in any significant way, it has to come from the top line, which is really what we are trying to do through all our global expansion.
Naveen — NS Capital — Analyst
Thank you, sir and congrats again for you and your team on a good set of numbers.
Jairam Varadaraj — Managing Director
Thank you.
Operator
Thank you. Our next question is from the line of Bhavin Vithlani from SBI Mutual Fund. Please go ahead.
Bhavin Vithlani — SBI Mutual Fund — Analyst
Good evening, Jay.
Jairam Varadaraj — Managing Director
Good evening, Bhavin. How are you?
Bhavin Vithlani — SBI Mutual Fund — Analyst
All good. Congratulations for good numbers.
Jairam Varadaraj — Managing Director
Thank you.
Bhavin Vithlani — SBI Mutual Fund — Analyst
So on the — when we look at standalone growth of about 8% and you mentioned, on a consolidated basis, the growth could have been 18% instead of 12%. But if you could help us what could have been the growth in India had the oxygen concentrators not been there? That’s part one. Second, which are the end user industries that we are seeing positive traction and maybe couple of them where we are seeing a negative traction?
Jairam Varadaraj — Managing Director
Sorry, can you repeat your second question, Bhavin?
Bhavin Vithlani — SBI Mutual Fund — Analyst
So, I mean, ex of the oxygen demand and when you look at the end user segment, where is that we are seeing positive growth momentum and where are we seeing a negative growth momentum?
Jairam Varadaraj — Managing Director
So let me answer your second question first. I mean, we see positive growth across all industry verticals except probably textiles, right. And the reason for that is pretty obvious. So all the sectors have grown, but the question that we really need to ask ourselves is, are all these sectors going to grow in the future. Now there is a certain tentativeness, there are still inquiries that are coming through, but are they all going to get converted in the same velocity as they used to get converted in the past, this is a question that we don’t have a clear answer for. So we have to wait and see and watch this very carefully. To answer your first question, our volume growth was about 8% in India without oxygen. With oxygen is around with about 2% to 3%.
Bhavin Vithlani — SBI Mutual Fund — Analyst
That’s helpful. The second part is, you mentioned that we took some corrective pricing actions early part of the calendar year. And when we look at the competitive positioning amongst the large players, what would be our pricing ladder? I mean, historically, we have observed that there was a 7% to 10% differential versus an Copco and maybe 1% or 2% versus an Ingersoll. Now how do we see — as you have mentioned that we have moved ourselves significantly up on the quality curve and there is an acceptance towards our brand. So it will be useful to understand the pricing ladders.
Jairam Varadaraj — Managing Director
Bhavin, that’s a million dollar question. If I had an answer for that, then I’ll be at a different level. If you ask our sales guys, they will says that we are far, far higher than Atlas and Ingersoll Rand, which is not true, right. But having done the price corrections and having tried to extract the pricing behavior of our competitors from their published reports, we believe that we have done a far more aggressive price correction than our competitors, right. I think our competitors were challenged by supply chain issues, which probably didn’t handle it as well as we did and probably because of supply chain challenges and long lead times, they have had to also be a little sluggish on their price corrections. So this is still early days, we have to wait and see. Yeah.
So to answer your question in the ladder, probably we have moved one or two runs, but I can’t put a percentage on. Are we higher than Atlas and higher than Ingersoll Rand? Definitely not. I think that’s our sales guys fantasy and imagination, but that’s something that is — we are not there. And let me tell you, even if our quality — and I know our quality is far better than these competitors. I know our performance in many machines are far better than these competitors, but we are dealing with Indian customers who still like something that’s more. Yeah. We haven’t shaken ourselves out of the colonial past. We still have that complex. We will build it over a period of time. Yeah.
Bhavin Vithlani — SBI Mutual Fund — Analyst
No, we understand that. Just last question from my side is, I mean, you had given a target of 14.5%, 15% margins on a three, four year trajectory and you’ve achieved it maybe in a year’s time now. Do you see further upsides to the trajectory that we had portrayed for a four-year, five-year horizon?
Jairam Varadaraj — Managing Director
So, Bhavin, we had said 16% by 2025, ’26 is what we had said and right now we are at around 14.5% or something like that. Now, like I said, this quarter has — it realized our prices and costs have not increased as we anticipated. So it’s a time to review our position because — the priority is growth profitable, not profitable flat performance. So we need to review that. So to answer your question, can we remain the same level of top line and achieved 16%? That is a no. And I would — actually I would actively discourage that, because then you’re just propping up, you’re extracting margins from the market, you are just milking it, you’re not growing. So it’s a good situation to be in, but not a situation where you can celebrate and say now we can keep extracting from the market.
Bhavin Vithlani — SBI Mutual Fund — Analyst
No, that’s very helpful. Thank you so much for taking my questions.
Jairam Varadaraj — Managing Director
You are welcome.
Operator
Thank you. Our next question is from the line of Manish Goyal [Phonetic], an individual investor. Please go ahead.
Manish Goyal — Individual Investor — Analyst
Thank you so much. Sir, very hearty congratulations on crossing INR100 crores PBT, quite commendable, sir.
Jairam Varadaraj — Managing Director
Thanks, Manish. Good to see you in your new avatar.
Manish Goyal — Individual Investor — Analyst
Thank you so much, sir. Sir, couple of questions just on probably on the gross margins again to probably get a better perspective as to — as the revenue mix change, also like in terms of higher aftermarket sales or more exports from India and backward integration what we have been doing gradually, also helping us very well in this quarter or probably we see this kind of revenue mix continuing. If you can give that perspective, like how our aftermarket doing? And in exports also, what I saw last year in the annual report is that, exports from India standalone was up 69% to INR421 crores and it’s now 17% of the revenue. And it’s driven by both sales with the subsidiaries and direct exports, I believe. So that is the first set of questions, sir?
Jairam Varadaraj — Managing Director
Yeah. So let me try and answer what I’ve understood, Manish. You can correct me. Now, let’s talk backward integration. The backward integration which we expected us to — which expected — which we expected to contribute to the bottom line was the motor project, right. Now it has certainly contributed, but nowhere near the levels of significance that needs to get called out in this quarter’s percentage for the simple reason our motor production volumes are still quite low because of that machinery that we did not get. So I wouldn’t — this profitability is not because of backward integration.
Coming to mix, our aftermarket as a percentage of revenue has remained at the same level, maybe marginally it’s grown. I would not say that that is the main reason. So overall, I would say we have pushed through price increases across all products. And we — it took us — and across all geographies, it took us a little bit of time to make it stick in some products and make it stick in certain geographies. And that’s why it took us almost six months to get to where we are today. So this is my understanding of your question, is there something that I missed?
Manish Goyal — Individual Investor — Analyst
No, that is what I was trying to see that if there has been some significant shift or moving the revenue mix, which would probably would have helped us on the better gross margins along with the price increases what we have taken?
Jairam Varadaraj — Managing Director
No, I wouldn’t attribute this to mix, it will be purely on our pricing.
Manish Goyal — Individual Investor — Analyst
And anyways exports will continue to do well, because our international subsidiaries are also growing well.
Jairam Varadaraj — Managing Director
Yeah.
Manish Goyal — Individual Investor — Analyst
Yeah, thanks. And sir are we — like in India, have we started to see traction on the any inquiries on the project side, which was quite subdued off late?
Jairam Varadaraj — Managing Director
Inquiry, it’s all at inquiry level. For instance, flue gas desulfurization, a lot of inquiries. Steel mills are talking. Steel, again, they were talking, now they seem to be saying, wait a minute, let’s wait and see. The same thing with cement. Cement started and now they are saying let’s wait and see.
Manish Goyal — Individual Investor — Analyst
Okay. And couple of data points, like we have seen a jump in our other income. So I believe it’s always like in Q2 we have dividend income from the subsidiary, so if you can share the number what was the flow-through of dividend income in the quarter, that would be helpful.
Jairam Varadaraj — Managing Director
There was no dividend income really in this quarter, Manish. The main thing other income is the exchange restate, exchange mark to market kind of a thing.
Manish Goyal — Individual Investor — Analyst
And how much was that, sir, roughly, because even standalone has seen a jump? So I was just wondering that — standalone other income is 26 crores?
Jairam Varadaraj — Managing Director
[Speech Overlap] exporting to the subsidiaries, right.
Manish Goyal — Individual Investor — Analyst
Right. Okay. So what was the forex gain, sir?
Jairam Varadaraj — Managing Director
It’s not a gain, it’s just restatement of our receivables.
Manish Goyal — Individual Investor — Analyst
Okay. Got it, sir. And last question, sir, on — so when we are talking about Q3, so like probably last con-call we did mention about a bit uncertainty on the growth aspect. So now, basically, we are seeing that we probably continue to see the growth momentum what we have seen in the recent past. That is what we should infer, like when you said first two months seems to be quite okay. So when we say this, we are referring to the growth part?
Jairam Varadaraj — Managing Director
Yeah, correct. First two months seem to be okay on the top line. I mean, they seem to — I wouldn’t say they are better than Q2, but they are continuing down that path. So, but we’ll have to wait beyond Q3.
Manish Goyal — Individual Investor — Analyst
Great, sir. Thank you so much.
Jairam Varadaraj — Managing Director
Thank you.
Operator
Thank you. Our next question is from the line of Rahul Gajare from Haitong Securities. Please go ahead.
Rahul Gajare — Haitong Securities — Analyst
Yeah. Hi, thanks for the opportunity. I’ve got two questions. Now given the concerns in the European region, with respect to manufacturing and energy cost et cetera, is there a case for you to see more manufacturing happening in India and shipping it to Europe for finishing and ultimately selling it, benefiting from labor arbitrage and also operating locally in India? That’s the first question.
Jairam Varadaraj — Managing Director
You mean manufacturing for ELGi to be moving to India or you’re saying generally European companies will move to India for manufacturing?
Rahul Gajare — Haitong Securities — Analyst
There is a trend that we seem to be gathering, given the energy cost concern there are more and more inquiries for manufacturing coming to India. So in case of ELGi, it could be essentially from the own subsidiaries and from ultimate clients also?
Jairam Varadaraj — Managing Director
So right now our manufacturing — our entire global markets are supplied out of our manufacturing in India. So we don’t manufacture industrial compressors anywhere else. We do manufacture portable compressors in our factory in Italy, but that’s a very, very small operation. Now, our European company is going to set up operations in India. I don’t know, I don’t see that big kind of exodus happening. We have to keep in mind that after the China sourcing experience for the whole world, every country just like India is looking at in-sourcing manufacturing, right.
So part of our — I believe the demand for our products in the US is driven by investment by American companies to in-source manufacturing. So it’s — everyone is behaving — all countries are behaving in a very protective manner, I mean, so is India. So I don’t think — I don’t — I mean China Plus One strategy, like I said, it’s for a sourcing point. We are not a sourcing company. We don’t — we are not a source for anybody, but such of those businesses that are sources for other brands, they will definitely have a benefit.
Rahul Gajare — Haitong Securities — Analyst
Okay. Sir, my second question, in your total sales, typically, how much of this comes from orders for a new factory and how much would be replacement demand? Is there a new [Technical Issues] typically track this?
Jairam Varadaraj — Managing Director
We do track it, but I don’t have the number in front of me.
Rahul Gajare — Haitong Securities — Analyst
Okay. I can take that offline. Thank you very much.
Operator
Thank you. Our next question is from the line of Vipul Shah from Sumangal Investments. Please go ahead.
Vipul Shah — Sumangal Investments — Analyst
Hi, sir. Congratulations for great set of numbers. Sir, my question is, what is our aftermarket revenue including service and spare as a percentage of revenue last quarter and where we intend to take it in two years, three years time, sir?
Jairam Varadaraj — Managing Director
Our aftermarket — our service revenue is very small, because we don’t do service. Most of our service at least in India is done by our distributors. So for us bulk of our aftermarket is just parts revenue. Our total at a global consolidated level, our aftermarket would be around 22%, 23%. And in terms of — for the next two years to three years I can’t predict where it’s going to be. It’s a — I can only say it’s a strategic priority for us, right, in all markets, not just in specific markets. But from an opportunity point of view, it could be as high as 35%.
Vipul Shah — Sumangal Investments — Analyst
Okay. And so naturally it must be a high margin business as compared to new compressor business, right, sir?
Jairam Varadaraj — Managing Director
Yes.
Vipul Shah — Sumangal Investments — Analyst
Thank you, sir. And all the best.
Jairam Varadaraj — Managing Director
Thank you.
Operator
Thank you. Our next question is from the line of Govindraj [Phonetic] from — an Individual Investor. Please go ahead.
Govindraj — Individual Investor — Analyst
Sir, how much of our export is in total consolidated sales, sir?
Jairam Varadaraj — Managing Director
Sorry, I didn’t hear you.
Govindraj — Individual Investor — Analyst
How much is the export, sir, during the quarter?
Jairam Varadaraj — Managing Director
Export?
Govindraj — Individual Investor — Analyst
Yeah.
Jairam Varadaraj — Managing Director
See, our business is done by our subsidiary. So our international business hardly has any export. It goes all to our subsidiaries and subsidiaries sell. So we are not like other companies that do domestic and export.
Govindraj — Individual Investor — Analyst
Okay. And the promoter stake is at 31% to 32%. Any, I guess, increasing it, sir?
Jairam Varadaraj — Managing Director
If you can give me some money, I will certainly increase it.
Govindraj — Individual Investor — Analyst
Okay, sir. Thanks.
Operator
Thank you. Our next question is from the line of Manish Goyal, an individual investor. Please go ahead.
Manish Goyal — Individual Investor — Analyst
Yeah. Sir, if you can —
Jairam Varadaraj — Managing Director
You are going to offer me money now, Manish?
Manish Goyal — Individual Investor — Analyst
I don’t mind, sir. Sir, can you give us a breakup of revenue between international and domestic for the current quarter and competitive number as well?
Jairam Varadaraj — Managing Director
Competitive?
Manish Goyal — Individual Investor — Analyst
No. Revenue breakup between international and domestic for the current quarter and the half year?
Jairam Varadaraj — Managing Director
For the half year. So they are roughly the same at around 40%, 42% India and the rest of it is the rest of the world. Roughly they are maintaining that same thing. Last year was about 55% domestic, 45% rest of the world.
Manish Goyal — Individual Investor — Analyst
Okay. And for the half year also, it would be somewhat similar?
Jairam Varadaraj — Managing Director
Yeah, same. Yeah.
Manish Goyal — Individual Investor — Analyst
And sir, like we kind of having a large outstanding borrowing on one side till now INR600 crore plus and on other side large cash of INR450 crore, so are we — like are we seeing some arbitrage, interest arbitrage benefit number one or there is an issue on the fungibility of cash utilization?
Jairam Varadaraj — Managing Director
So if you look at the debt, it is primarily in the overseas subsidiaries, which is — bulk of it — big one is in Europe. The next big one is in America. And the third big one is Australia, right. So these are the three areas. The India business is generating cash. And as a consequence, we are using packing credit, which we are getting at a very low rate of interest and we borrow that and put it into deposits as a means to earn a little bit of a margin there and keep it safe. Yeah.
Manish Goyal — Individual Investor — Analyst
Okay.
Jairam Varadaraj — Managing Director
So there is a bit of an arbitrage in India.
Manish Goyal — Individual Investor — Analyst
Okay. Great, sir. Thank you so much.
Jairam Varadaraj — Managing Director
Thank you.
Operator
Thank you. Ladies and gentlemen, that was the last question. I now hand the floor back to the management for closing comments. Over to you, sir.
Jairam Varadaraj — Managing Director
Thank you, Inba. Thank you, ladies and gentlemen. It was a pleasure to be with you this evening. We thank you for your continued support and your continued curiosity about our performance. So we look forward to talking to you at the end of the next quarter. Thank you very much.
Operator
[Operator Closing Remarks]